~~~DD(PJW EA2d "JJ~ ~VI! Y Vol. 1 Public Disclosure Authorized This report is restricted to use within the Bank.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEfNT Public Disclosure Authorized

THE ECONOMY OF BRITISH CENTRAL AFRICA Public Disclosure Authorized

February 10, 1953 Public Disclosure Authorized

Department Of Operations Europe, Africa and Australasia Table of Contents Page

Part I British Central Africa

1. Introduction 1

2. Political Background

(a) Constitution and government 4

(b) Native Policy and the movement towards cl.oser -union

3. Economic history 7

Part II

1. Northern Rhodesia 17

2. Southern Rhodesia 26

3. Nyasaland 31

4. Creditworthiness 34

Appendix on the Report of the Fiscal Commission PART I

1. Introduction

British Central Africa is the term commonly applied to the three Brlish uenuencies of .outhern Rhodesia, Northern Rhodesia and Nyasaland. Together they form a continuous bloc of territory in the heart of Southern Africa, extending from the Tropic of Capricorn in the south to within 1 0u of the equator in the north and xovering 476,000 square miles. The combined territories are thus about the same size as their neighbor to the south, the Union of South Africa, but they are more sparsely inhabited. 'The population in 1951 consisted of some 6 million Africans, 180,000 3uropeans and a few thousands each of Indians and Colored.

The three territories are at present separate political and financial entities. Southern Rhodesia, in fact, has a different political status, being a self-governing colony while the two northern territories are protectorates. But they are in a number of ways interdependent. For example, the two Rhodesias are served by a common railway and they are both dependent on Nyasaland for an important part of their labor supply. More- over, the three governments and the government of the United Kingdom have under serious consideration a form of federation for the three territories.

There are, therefore, grounds for treating the three economies as one. In this report Part I will be devoted to a survey of the more gAnerPl aspects that can conveniently be considered together, and Part II to the more individual financial and develooment auestions that muitlinevitably be considered separately. Under Federation, if it comes about, even these would be to a large extent merged.

Most of Central Africa i. a plateau ranVinP bAwAen 'Ann anA 5,000 feet. The high mountain ranges which flank the Great Rift Valley rise above it in the east. at one noint. to In nonfe + * BIeo +he level of the plateau and separated from it by steep esearpments are the lower vallev of thA princinal pU and the shore Tofake VySa. climate is modified by the altitude. Temperatures on the plateau rarely rise mucih 0bve00* Th +~ sesni;n- ~---~-'t is followed by the rainy season of 3 to 4 months, between November and r-- Rn lis hUghest in the eastern mountains and it is only here that there is any appreciable rainfall during the dry season. The concentrated rains make for an irregular flow in the rivers. The largent of these is the Zambezi. which forms the border between the two Rhodesias and eventually flows into the Indian Ocean. Its watershed io Ao 1AvaA no the three territories together and largely coextensive with them. Into it run three large tributaries,the Kafue and the Luangwa in MNIthPhMA-igM and the qhire river in Nvasaland. The only other river basins of any size are the Chambezi-Luapula, part of the Congo Sysom in the north- and the qahi and the Limpopo. which flow indenendently into the Indian Ocean, in the southeast. During the high-water season after +he 4 +hontherive mravPlomy and flond thp flnt areas on the nlataau through which they pass. The flooded areas, which in Northern Rhodesia are ofI vast exte-nt,dgnrt int rwmp011T'on +Aln fI~nnAo vP,A rliirng the long dry season. Many smaller streams, in fact, dry up completely, so r1v+.~ 4-1,.-+ +1,~- -- es+0- Gie 'kW,4.,1,rM-a"Q1 .+~.a ilno tht the pltauityeonnl ve.rhg rsladmr rls

covered with trees according to local soil and water conditions. Though

useful timber. The soil, too, 'is poor over large areas. This deficiency, togetherl WiLth thel imoeUyL1UPVtatizU the concentrated an," uncerta-in, rainfall, limits the possibilities of agriculture.

When the forerunners of British settlement came in the latter half of the l9th century, the country was very lihtly inhabited. The primitive agriculture practiced by the African militated against a dense population, for on the poorer soils it depended on burning trees every few years to fertilize the soil with wood ash and on shifting from patch to patch with the cycle of natural regeneration. The tsetse fly infested - and still infests - more than half of Northern Rhodesia and large areas in the other two territories, effectively preventing the keeping of cattle. Even in 1931 estimates of the population put it at only 4 million or 8 to the square mile. And this was many years after tribal warfare and the Arab slave trade to the East had been eradicated. Many Africans, moreover, had had the opportunity to work in places where better diet and medical care were provided; for subsistence agriculture often left the African with insufficient food to last the year and lowered his resistance to such tropical diseases as bilharzia and malaria.

The opening up of Central Africa was very largely due to the initiative of two men and its development owes much to these two men and to the institutions that they left behind them. David Livingstone made his first expeditions in the 1850's and mission stations followed him many years before there was any organized government. The missionaries took the initiative in introducing new crops into Nyasaland such as tea and coffee and in promoting trading companies. But apart from their spiritual mission their greatest contributions were first in education and second in medical work. Almost solely because of their efforts could it be said of the poorest of the three territories before the last war that "there is in Nyasaland a higher percentage of literacy in the vernacular than in any othAr Britiqh DAnndancy in tronical Africa".

C.,ecil Rliodme una a ining financ-ier andi a rhqrnnion nf rnhia tion. In 1889 he formed the British South Africa Company to take over minral-ocessiona ~ ~ ~ 1~lcifss er eoe h company received a Royal Charter under which it administered until 1923 what ere,nuallr kem h +ur nhA4 T-v.ment eias wna the building of the railway northward from South Africa and westward from L . 6 ,AP- -, f.4.-, P +,,w. 14 n ma, n 4n m n+- D.elorrown 4. 10() 1)rr W1 J t. A~'. Li .LL . 4.Lz VWJ 4. A.J j J .4J~ ' L'~W J '.' -- U ._?"* - 1909 the line had been continued north to the Belgian Congo border and

WLJLI U11" rJx1jal %JtLloU LLIM~5, ULVa4..1CU ~JUL.L. I_C%._.CLbQj i anu established government administrations, another economy - the money economy - was created side by sLue w1u te ulU subsistluen economy witu profound effects upon the latter. Many Africans went to work in the money economy for short periods whenever they needed money to pay the head tax or buy cattle or pay a bride-price.

Though the opportunity of work in the European economy is the greatest economic change in the lives or the Africans, the latter have also been drawn into the money economy in other ways. Some Africans have indeed become permanently urbanized. Others now grow more food than they need and sell the surplus or they grow cash crops in addition to their food. A few rely on cash crops exclusively. With the money they earn in this way, a minority are beginning to use ploughs and fertilizers and are improving their land.

In the Native Reserves allotted to the Africans soonomic life has thus been modified greatly. In spite of the changes there are, however, many areas which can still be described - for want of a better term - as basically a subsistence economy. The money brought in from outside is only a small and uncertain accretion to their income. Indeed other problems have been added. The greater security from war, slavery, disease and famine have allowed the population to increase and more old people to survive. Some Reserves are now overcrowded and others are stripped of the able-bodied men who would support them.

Geographically, the European economy is still small. Except for a. few enclaves elsewhere, it is a belt of mines, farms and towns along the great artery of the country, the railway. Economically, it is, of course, by far the more important of the two, for .in it is concentrated nearly all the taxable wealth needed to administer and develop the country.

But, since the money economy is heavily dependent on producing commodities for export, it is vulnerable to fluctuations in the market. The vulnerability is aggravated by the cost of the long haul to the coast. In bad times, there would be severe unemployment among Africans if the safety valve of the subsistence economy were not available. For this reason, the governments have tended to discouraze the permanent urbanization of the African, at least until recently. And the attitude of European workers towardq any comnRtition from the Africans which threatens to lower their -4-

11YL.1115 OV0,1VACLUS 01. UUF11.VU tllaw 1 J OUS TILUWLIL-L' UP'LlUs tOI be- 111re restrictive whenever a depression makes this competition more acute.

These two characteristics of Central Africa, the dual economy and the vulnerability of the money economy, are important to an understand- ing of its past and future development.

2. Political Background

(a) Constitution and Government

The British South Africa Company's admiristration came to an end in Southern Rhodesia in 1923. The European population of louthern Rhodesia had vigorously espoused the cause of responsible government. When they were given a choice between self-government and union with South Africa, 6Cv voted in favor of self-government. The white population was then 33,000.

Southern Rhodesia was then formally annexed as a British colonr. Under its new constitution Southern Rhodesia became fully self-governing in domestic matters. subject to certain limitations. The moqt important of these reserves any discriminatory legislation affecting Africans for the consent of the Secretary of State for Commonwealth Relations and provides for a considerable measure of supervision over native affairs.

The system of government was modeled on that of the United Kingdom excent that there waq only a sin-le chamber, the Looslative sembly. The Prime Minister and the Cabinet, who are members of the Legislature, are annointed by t.he Governor who is the renresentative of th 7rnarn Thi franchise is open to both Africans and Europeans but is restricted by inanmnra nn rerty qaAfiicatio- Tn nan+ +h kn iiA-A 1 I Ksl+ a few Africans, there being only 420 on the roll in 1950. However, it is belineA+h-+ snwal +h u dand-0 onII are-riA ANak"+ is + _-c +s--A constitutions similar to those of other non-self-governing dependencies. aln+An- wa-wheTTe+d K-5 -Am na -eA n a +h-a.. UO-611 +a- State for the Colonies. Direct British administration in Northern Rhodesia ~ .7.+ 4LL WA.C1 U 11V 00 -M UV1J JGL4J'Z V"_U1L4.L"_ iL1 t::W.;11 territory there is an Executive Council and a Legislative Council, with ULA.cia.L" mbUrV U1tWH AVUW Wlu guvurullf, sulViuve atau "V.11L.LULS- irum the local population. The Executive Council is presided over by the Governor anU hs a majUrity Vf VfiialUt as memuers. T e Legislative Councils mark a difference between the two territories. In Nyasaland the Legislative Council is presided over by the Governor and has equal numbers of officials and unofficials; all the unofficials are nominated. In Northern Rhodesia, a Speaker presides and the council consists of 9 officials, 10 elected unofficials and 4 nominated unofficials representing African interests. Franchise is open to British subjects with certain qualifications, but in contrast to Southern Rhodesia, most Africans are automatically excluded, since they have the status of British protected persons unless they apply for naturalization. In both territories the representation of unofficials on the two councils has been increased in recent years. Africans now sit as nominated members on both Legislative Councils. (b) Native Policy and the Movement Towards Closer Union

At intervals during the last 40 years the question of the closer

been revived, but always without result.

The dominant issue in the movement towards closer union in Central

the "Two-Pyramid Policy" that prevailed in Southern Rhodesia held that development of the to 1a1esnould take place side y sae rauther than in competition. Laws similar to acts passed in the Union of South Africa restricted the areas in which Africans might hold land and the skilled J.obs in which they might be employed. Half the land has been set aside as a European Area. African trade unions, though they exist, are not legally recognized and the posts that are filled by Africans in the public service are limited. Political advancement of the Africans has been subordinated to the economic.

In the two Northern territories, where the so-called "paramountcy" of native interests has been proclaimed, a different policy has been followed by the Colonial administrations. This is especially true of Nyasaland, where there is hardly any European population other than govern- ment officials and missionaries. Only a small area of land has been alienated to Europeans. The government has promoted the advancement of Africans in the civil services and has encouraged the creation of trade unions.

Local government by Africans in Nyasaland has been fostered under the system of "indirect rule" common to many British dependencies. Native authorities and native courts have a considerable amount of power. In the last decade African Provincial Councils have been established. From the membership of these Councils are chosen the members of the African Protectorate Council. At the moment these Councils have only an advisory function, but the Protectorate Council recommends names for the nominated members of the Legislative Council.

The position of Northern Rhodesia is, in some ways, midway between the two other territories. Like Nyasaland, it has a colonial administra- tion; like.Southern Rhodesia it has a European electorate. The policy towards the advancement of local government, of Africans in the civil service and of trade unions is similar to that in N-vasaland. On the other hand, an industrial color bar exists on the conper mines and railways, although it has no legal sanction. Some land has been alienated to Europeans in the favored area along the railway line, but there is no statutory limitation to African holdings. In ariculture, thrphe hAr at times a conflict of interest between African and European maize producers. The small EuroDean Poulation has con.tantly looked to u-ninn iw.rith qe-mt.hPrn Rhodesia as a means of freedom from "Colonial Office control." Issues such as the "Daramountcy" policv and the erployment of more Aricans in the civil service have aroused protest. A strong movement in Southern Rhodesia has supported them. The African population, on the other hand, I- 1- - A- nv% Y4t nmsnlAn,* and thiq hag sometimes been Commissions preferred by independent observers such as members of Royal -nn - CLUPULLiu U %Ju L11VVO U .rflW

in V?39). Vn SUCIL comUssion, 44whe Bleiso Co-asion rpotedi It rejected federation and, for the time being, amalgamation. Although there were svrlreasons for W"s.L sin nobtdyoeoft~~~ imoortant was the Commission's concern with the variations in native policy. They referred to Ue -V-Lsi uZL.anmiuy J.,UL-. f u1Cv" -4-Y- tion." Instead they recommended the amalgamation of Northern Rhodesia and Nyasaland and the formation of an nter-terror Council on which Southern Rhodesia and the two northern territories, amalgamated or not, would be represented.

Since the war there has been a series of unoffitial and o conferences to reconsider the possibilities of closer union, the latest of which was held in January of this year. at the previous conference, in he spring of 1952 representatives of the British and the three territorial govern- ments considered a-report prepared in March 1951 by a conference of senior officials of the four governments. The report recommended a form of a federation which was an ingenious compromise between maintaining the coor.- safeguards of the status quo and securing the advantages of greater dination. Except on a few points, the officials- recommendations were accepted and embodied in a Draft Federal Scheme published in June 1952.= According to the draft scheme the constitutional position of the three territories would remain unchanged except that certain functions would be transferred to a Federal Government.

These functions fall into two classes: the Exclusive list, over which the Federal government would have sole jurisdiction; and the Concurrent list, over which both Federal and Territorial governments would have jurisdiction, the Federal government prevailing in case of conflict. Besides those functions such as External Affairs and Defence that would normally be expected to be associated with a central government, the two lists include the principal public utilities (roads, railways, communica- tions, electricity and water) and a number of matters affecting trade, industry and banking. The railways, for example, are on the exclusive list. Three ad hoc Commissions have been appointed to report in more detail on three matters, fiscal arrangements, the public service and the federal ludicature.

Two important subjects excluded from the two lists are land and land-settlement questions on the one hand and matters relating to trade unions and industrial conciliation on the other. African education also remains a territorial subject. As an additional safeguard to African interests. the scheme includes an African Affairs Board with members nom- inated by the governors of the three territories and the Governor-general of the federation. This Board is intended to review all leislation to determine whether it discriminates against Africans. Procedure is laid

zF -Llu Uwv ruporTs wtsrtl pUu)L11Uu tL5 W1iJkU paers WAu. o u w uy -7-

uo-wn Lur Z3UU1axLPkO.L116 euv -LU6.L5.LafLV1 WILi±.LL;tJZ Lu%""U L)~Ue ... c'ulIL Lu measure" to a Secretary of State who may revoke it.!

Most vocal African opinion has consistently opposed federation. African representatives from Southern Rhodesia, though opposed to rederation, attended the April, 1952 conference, but those from Northern Rhodesia and Nyasaland retreated from the rather guarded position taken at an earlier conference at Victoria Falls and refused to attend, taking the position that no safeguards are of any value. Lately there have been indications that some Africans are taking a more favorable view of federation.

On the other hand, it is evident that the views of both the British and the Southern Rhodesian governments have changed greatly in the last decade and that concessions have been made on both sides. The govern- ment of Southern Rhodesia has agreed to elected African representatives f.rom all three territories in the Federal Legislature. It is also now an accePted principle that the two northern territories should remain Protectorates unless a majority of the inhabitants declare themselves in favor of amalgama- tion and that the territorial governments should continue to be responsible for the political advancement of the Africans. The British Government, hitherto guarded in its attitude, has now made a definite statement in favor of federation. On November 21st, 1951, the Secretary of State for the Colonies said in the House of Commons:

"His Majesty's Government in the United Kingdom are convinced of the ur2ent need to secure the closer association of the three Central African territories; and they believe that this would best be achieved by federation, which they regard as the only form of closer association likely to meet the requirements of Central Africa."

Why haq thiq readineq to 6omoromiqA and thiq ne of uranny arisen? The three territories stand to gain from being part of a larger -nonomi r uni t. he Atnonnmin nrmment in fnvor nf f#*rn+An uinr1anht xl have force and they are discussed later in this report. Another potent factor is of a Political nature: it im the widely felt anxiety "about thc course of Native Policy south of the Limpopo".

3. Economic history

An outstanding characteristic of the three territories is their distance from the sea. The nearest points in Nyasaland and Southern Rhodesia are 200 miles by rail from the port of Beira. The extremity of the railway line in Northern Rhodesia is over 1,400 miles away. Large areas are remote from any communications at all. In these circumstances, development depended initally on the discovery of minerals or the cultivation of croos that could stand the high transport costs to overseas markets.

1/ In the latest form of thn Federal Scheme,nn-pucliohA in Feb 1953, the Board would consist of six members of the Federal Assembly, three Africans and the three R.nroansnc roonsile for african interests. Ts4- n would be virtually the same. - 8 -

Gold first prompted 1uropean penetration of Southern Rhodesia nnA for Io vparq it remained the basis of the economv. By World War I a number of other minerals had been developed: coal (mainly for the railways themeaclva and local ue). chromite and asbeston in louthern Rhodesia: and lead and zinc in Northern Rhodesia. Until the discovery of rich ores in Northern Phnaain in +.hi iA+tA 192nt nonner traffin was limited to the Katanga mines in the Congo. But these, together with a small amount of a inlt+nal nAne and the rAt.nrn traffic an.rAtP. were not enou-h to keep the railways in a sound financial position. They had been financed mainly W Aban+ra garanteed bythe.,_ZA. Company. This marantee had frequently to be invoked and the B.S.A. Company for several decades paid

Vely n-4-&I+ii,-1 ~ e%^-1A 1k.~actqn Aqfnr,+_nvr r rmrn in qn quantity and exported to the outside world. Tobacco is the most important, but + has h A a somewhat chenuredA h+nr There ars a+ t.4ma oaer- production by the European farmers in Southern Rhodesia for the limited iT V - 1-4l

There was, thus, only a limited marke+ for the pro+c of European farmers. Settlers have gone into dairy and maize farming in a..AL4-u - T31, odew a A nd oa 'lesser ey.+Wn+ 4n 1117o+hern W -1A-4- bu+ riri- +he 0 UIAV1_I 1"'AAVO_LG LIU V~ V vl. A"A- ~ 0-~. , - -~~~~- stimulus of a local market Africans, too, have gradually increased their and maize have been exported to neighboring countries and to the U.K.

Nyasaland, too, faced difficult problems. No minerals were found to orovide a remunerative traffic fOr iUs Li1g-cUst ra Au oX D,re. Several agricultural crops have been tried. Both coffee and sisal failed. Tea estates were successfully established in the small area wnere there was adequate rainfall. Cotton, first a European estate crop, gradually became an African peasant crop, for the African was better able to stand the trials of slump and insect pests. Tobacco has also been produced, the higher grade flue-cured by European settlers and the dark-fired tobacco by Africans. But the vicious circle of low traffic and hirgh transport costs made Nyasaland an economic backwater.

The 1930 slump hit the whole area hard. In Northern Rhodesia the development of the new copper mines was just being completed, but not all of them were put into production. Between 1931 and 1933 the European population fell from 13,800 to 11,300 and African employment (in the whole territory) from 67,000 to 37,000. In Southern Rhodesia the rate of immigration, which had been highfduring the boom, fell off sharply. Farn- ing became a.precarious occupation. In both Rhodesias a maize control scheme was introduced to prevent over-production and to establish a basis for sharing the sheltered home market between Africans and Europeans. The emergence of this kind of competition was a disquieting feature of the period. -9-

Apart from mining and agriculture, the principal 1uropean oncuoations were trade. government and communications. In 1939 the Bledisloe Commission could write: "Panufacture, other than the first Prounc inr of raw materials. is scarcely to be found outside Southern Rhodesia, which also acts to some extent as a supplier of commodities and am a diqtrihutor of imports for Northern Rhodesia. Even in Southern Rhodesia there has been no extensive factory development.It

By 1938, the European population was ?6OO and the African between A and Zk MdlLifn- Some 1"0LOO ifrinanM ' ahout half thA abIA-hodiAd mal_A were employed in the European economy. Nyasaland, which is much the smallest tPr?itnry but hao the Inaent onnintion, offered littln annnomi nnnr+.nnit.v and many Nyasalanders worked in Southern Rhodesia and the Union of South Africa. There mas similar micratAnn n TA*p -numnhr f.tron Northern Rhodesia. Southern Rhodesia,too,employed many immigrant workers from

million in 1938. The whole area was still in the position of having a .. AP m 4 -+4 e A 4- ,4+_a+4n n d a w 1 nm to carry it. One observer described the outstanding feature of the three

me war actea as a poweriuSa- stUus tOu he COIv1my. T'he prOucc- tion of strategic minerals such as copper and chrome was boosted. An RAF training scheme was started in Southern Rhodesia. This increasua activity stimulated the demand for manufactured goods at a time when Central Africa was cut off from overseas supplies. The opportunity was taken by the Government of Southern Rhodesia to adopt a positive policy of industrializa- tion: I"Wie cannot continue purely as a raw product country". In 1912 an Iron and Steel Commission and a Cotton Research and Industry Board were established to develop these two industries.

In some quarters a depression was expected after the war on the analogy of the aftermath of World War I. Instead, prices for raw materials continued to rise until 1949. Even the slight recession in that year was quickly counteracted by the devaluation of the pound. A renewed impetus to prices came with the war in Korea. At the same time tne continuea dollar shortage in the sterling area and 'estern Europe gave Central Africa a more favorable market than hitherto for those raw materials that otherwise had to be imported from the dollar area. Central Africa benefited from its position as the principal source in the sterling area of copper and tobacco. Output of cotton also increased. During the war, too, the economies of countries in the Far East had been upset and certain commodities were in generally short supply, e.g., tea and vegetable oils. The only product adversely affected was gold, because of its fixed price; even gold produc- tion was temporarily revived by devaluation. - 10 -

The effect on exports of some of these changes is shown in Churt 1 and Table III. In 1946, when the war effort was spent, production of minerals such as co,per and chrome was less than before the war. it the same time prices had not risen more than 60% on the average. The value of exports had only risen by half. But between 1946 and 1951 they tripled in value, as a result of both increased output and higher prices. Compar -, atively speaking, the outstanding features are: the predominance of copoer, now more than half the total value (all minerals would be about three-quarters); the decline of gold, in 1938 more than a quarter of the total value, and now only 6%; and the areatly increased value of tobacco. now a sixth of the total value.

Exports are, of course, by themselves an unsatisfactory guide to an economy. Much of the value of extortq leaven the Rhodep.ina in the form of dividends to the shareholders in the mining companies, which have been financed by British.South African and American apital. Ntional intnma figures take this into account. They also make allowance for both local and export industrien. The contributions of the txrn ay-P nt anual

4 Etimate for the tun RhoAMaira nit thia+ini-mN nmn-A 4n 10yA at 656 million. This was less than double the prewar figure. In view of the wartime -iqp in prinea and the inc-eane 4" ponla+in there was probably little, if any, increase in real income per head. By 1950 the comhind inname hea r'han Lion m4llion m +'on A,n,i, +Ia 19- 6 ie-e. This certainly represented an increase in real income per head, perhaps of' the o-rder of' 9nl. The= ufrln-wae4are in,oThern1 ode-i has undoubtedly enjoyed a much greater increase in income.

Investment and expanded government services have added to the ~nrinco "ms alrady created by r.-,!in6 pr-.ces and -production in UI- main export industries. A large part of this investment has been carried vuit 4 hv yv nu nnncymy. o V uAiu- 4 a e m..W U -- REUCOG66 out~~prvtec--WanlSa ~ ~ 'b JU-VLA4LL.Nw mie Ilivt- bueen oe0n11ed an11d settlers have come to take advantage of the profitable tobacco prices. There- has0 als)o been a substantialI "- investment in manufacturing industry.

hr%portunities fOr mlyeti ULI z0rpa ecnuW hLave 61Ur5- fore greatly increased and there has been a large immigration into it by boh frians W-KA E.uroans. AS a reSult tLmr ur s beQn a heavy demand for housing and such services as power, water, streets, schools and LAspiaOs. The Governn adepartments deaLing witn these services nave had to be expanded and there has been a boom in the building and construc- tion trades. In turn these two nave caused further immigration and the need for more services and more investment. Finally, in order to carry the increasu w4unage of exports and even more the greatly increased load of imported consumer and investment goods, the railways have had to invest on a large sCale. By 1951 the European population had increased from 107,000 in 1946 to 180,000, and African employment from 600,000 to well over 800,000.

1/ The addition of Nvaq1Anr1 unnlrl probably not add more than lu' - 11 -

rose rapidly in those industries where there was no legal or voluntary pe. contro. TIst WIMO patcual tru 1ofthebulding industry. But there were certain basic goods or services which as a matter of ,oA...;y were n0to "Alanuu LO uperate at a prolit. Ana tnese were th:. main services that could 'not be expanded rapidly enough to meet the uncurbed demand. acute shortages of coal, railway transportation, power and port facilities developed, so that it was difficult at any one time 4o say which was tne narrowest bottleneck These same "1ninflated" industries tended, too, to suffer from the drift away of their labor up.LY. Lue Wgration of africans into the Juropean economy meant a greatly increased demand for food. Heavy imports of maize, the domestic price of which was controlled, were necessary in drought years.

14easures were taken to deal with these problems. The colliery company entered into a management contract with an experienced coal company whose mines in the U. K. had been nationalized. The private company that had been operating the Rhodesia railways had inadequate capital for expansion; in 1949 it was nationalized. An agreement was made with the Portuguese authorities to improve facilities at Beira and subsequently an understanding was reached that a new rail link with the sea through Lourenco Marques was necessary.

Even so, heavy penalties were paid. Inevitably rapid development entailed costly expedients instead of long-term plannin. !ankie colliery introduced mechanization more rapidly than it could train its labor and, in efforts to produce more coal from a newly opened mine, it ran into a granite fault that might have been discovered if it had not been pressed for time. The copper companies were forced to burn wood for lack of coal, the cost was four times as high. As a result, the newlv expanded forest service in Northern Rhodesia has been preoccupied with the problem of finding adequate wood for the mines.

To satisfy demand, imports were obtained from abroad. St-e1 ua bought at grey market prices, The capacity of plants producing cerment, which is costly to import because of its bulk, was inadequate and imnorts of cement added to the already serious congestion at the ports. Heavy demurrage charges had to be met on ships waiting at Beira. Rometire for weeks. As a result many goods were forced to enter by the Port Elizabeth long route from in South Africa. Because of the uncertainty of t.anes"t governments had to bring in certain commodities in bulk many months ahead and consequently high financing charges had to be bornA an tocks. T.ae stocks of jute goods were bought at the top of the market.

Demand was not inhibited by any large increase in the charges for basic services. Railway rates. in fact. were not. rain n -airethei oer" level until 1952. The colliery company's prices were limited by agreement to a fixed amount above costs. StatutorY bodie cuh the lectricity Supply Commission in Southern Rhodesia are, by law, prohibited from operating at a profit. - 12 -

At a time when government revenues were nigh the climate of opinion was against every effort of the governments to curb consumption by increased taxation. In 1949 the Southern Rhodesia government announcea its intention of imposing a 20% export tax on tobacco. After violent protest, the tax was replaced by a 15% compulsory loan. This levy was not repeated. Personal income tax in Northern Rhodesia was actually reduced early in 1952. In none of the three territories can personal taxation of the European population be considered heavy. The governments of both Rhodesias have, moreover, been paying large subsidies on maize, the staple of the African. However humaneote motive for it, this subsidy is bound to cheapen the cost of employing Africans.

In the last eighteen months there have been considerable changes. In Southern Rhodesia a drought affected the 1951 maize and tobacco crops. This coincided with a heavy inflow of goods from abroad in response to previous orders and with the onset of the worldwide textile recession. In the following spring the new monetary policy of the United Kingdom had the effect of making capital from that quarter both dearer and more difficult to obtain. The Government has slowed up its capital expenditure and imposed sti:mr taxation. Building costs are coming down. There are signs that unemployed labor is catching up with unfilled vacancies and that industrial capacity is beginning to overhaul unsatisfied demand.

Nvasaland had a drought in 1949. necessitating heavy imports of maize in 1950. In 1951 there was a slump in dark-fired tobacco, an imnortant African cash cron. It is probable that as a result African purchasing power was greatly reduced. In any event, imports of cotton piece-goods were nonniderably lower in 1951 than in 1950. which adversely affected government revenue. It has been necessary, therefore, to modify the gorernment's investment plans. Nyasalanria difficultie are by no means at an end, as in 1952 there was a fall in the world price of tea.

Only Northern Rhodesia has escaped the current of deflation. 4 Panmn4,,an +rnahi a la.nan inn unnA vn +h anlmmaY. of 1049 Thmy,,,,, is still high and building costs continue to rise.

The restraint on the previous boom so far as it has occurred is n +he wh oia _ a hol+'hy dha nig0Cenal African s+ll hna ru4ivoralanveng as yet undeveloped and the basi s for further expansion undoubtedly exists. 4 But- i+ 4 4--4-+, +),+ ablA.+in+^i+rr 1 +0ta" Anl4"a ha tn husband financial resources, to curb as much as possible the less essential I4,A; ,P m o,+4 +rr + m +hn *rarr tr far the Anwalanment of +ima more important services and the more stable industries and to prepare for +W am neWQWAW+ p h414+r- -.--- of a s.a ins nt+han +n +h= mai-A avnr1%+ industries. The lesson may well be learnt from many other primary-producing . 8 . %OL1~AW 8.1 .U 1IJ j'a. - cowu ries ta ua ic.L.t l c" ac0LQ 4'4n be irs GL A4%d"1W) 5 well be said that the lesson is a hard one to teach the public at large. 1110 Wasonu Ud rvaLy ao uLdLu 6 %JVWev1umU VL-3WLAWL%A.*UnL.L Rhodesia which has been at pains to put it into effect against the tide of public opinlon. TU VrUntrn 1uuUta guvurnufl u wUA aware V.L 1j.W dependence on a single commodity, but as government revenue rises by leaps and bounds each year, it is even harder to exercise restraint. - 13 -

"16 I-tpiresent Llu1 LL I-1 W -WAkJU.LJ 0LtJI M-SLUJu I U.LL4W2:il tU= 1-0 U .. %A . Ut-'1 colliery company, the railways and the electricity supply authorities to

prvucosu w1L± ulleir Uevelupments unuer Less pressure Iruft uay-t-ay provtifms although the latter will not be by any means eliminated.

By 1955 the Colliery expects to increase its output to 5 million tons a year, about double the present rate of production. New arrangements for fixing the price of coal were made at the end of 1952. As a result of these new arrangements and of rising costs, the price will be about 5u higher. This should help to curb wasteful use of coal and ease the position of the colliery in a period of rising costs.

The railway is continually adding to its stock of wagons and locomotives and new facilities have been added at the port of Beira. If construction keeps to schedule, by the end of 1955 the new Southeast rail link with the sea will be completed from the Shabani branch to Lourenco Marques. This link together with the new marshalling yards at Bulawayo and other improvements being undertaken by the railways should provide adequate port and rail capacity for many years to come, although many improvements such as double-tracking of the Bulawayo-S0mabula stretch of line may still become essential and motive power and rolling stock will have to be augmented as occasion demands.

?ower presents a longer range problem. Difficulties with the supply of coal have accentudted the desire to use cheap waterpower. There are two large schemes under discussion, the smaller on the Kafue and the larger on the Zambezi in the Kariba gorge. Both are sited near the confluence of the two rivers. The advantages of the Kafue scheme are that it requires less capital and it will take less time to construct. Kariba, on the other hand, would probably provide cheaper power in the lonj- run and after the first stage of its construction small units could be added as demand increases up to an ultimate capacity of 1.000 Mw. This exceeds the total capacity in the two Rhodesias today.

Meanwhile thermal power capacity must be built up and here there is some controversy-as to whether it would be more economical to site new plants near the centers of consumption in the industrial Midlands of Southern Rhodesia or at Wankie the point of production. The railways are implicated in the decision, since coal for power is one of their most important items of freight and at an early stage of the construction of Kariba thav would have to extend a branch line to the Zambezi. The latter would be joined later to the main line in Northern Rhodeia to form the qo-called qin0iq-KarnA tnt-off

C1aIrlv the futnrA of nnwr involvaeflet-iinnna -frot.inri +ha shnl economy of the two Rhodesias and possibly even N:asaland, too. No decision hat vet. b n reAnhPH for it io AviAont thpt +.hInineiiAnnl anhaoan lnna sO far been considered more in terms of their technical feasibility than of the

Rhodesian hs tobaccbn mal t ULSUQU he nie igdom wher it-1 is 4. . Rhodesian tobacco has been mainly in the United Kingdom where it is now - 14 - approaching its limit. Further expansion in the estublished export industries is more likely to come from copper, asbestos dfnd chrome mining, which have hitherto been held up by the present shorta:,es of coal and transport. A new export industry in the course of development is the production of tanning extracts from the extensive wattle plantations in the eastern districts of Southern Rhodesia.

Other prospective investments are mainly to serve the local inarket. A large weaving mill will make for a better balance in the Southern Rhodesian textile industry. 2yrites and phosphate deposits afford the basis for a chemical and fertilizer industry. The Southern Rhodesia ,overnment hopes to turn its small iron and stesl plant at Que Que over to private enterprise in order to develop that industry, while in Northern Rhodesia a small plant is also planned to manufacture pig iron and steel balls for the copper mines.

In anticipation of the eventual development of cheap and abundant hydroelectric power from Kariba, a pilot ferrochrome plant is being constructed at Gwelo by a British company. The completion of Kariba would also ensure a steadier flow for pump irrigation below the gorge, where a private company is currently experimenting with the cultivation of sugar.

Another possibility for lare scale irrigtion exists in the Sabi- Lundi valley. where an initial survey by an engineering firm has already been made. Followins their report, an agricultural station has been opened and further develo7ments await the results of experiments bein: conducted there. Already, however, a small African irrigation project has been aqtablinhed in the valley. Wheat. in which Central Africa is deficient. is being successfully grown there.

In Nyasaland a multipurpose project is being investi?ated which wmuld qtahili-e thA 1PvPl of the Lake and of the shire river. -,rovide Dower and make irrigation possible. Cotton is the principal crop at present renum in thp unl1v hit vnriv.et inveAtment in a sivar nlantation is expected in the near future.

Softwoods are at present imported into Central Africa, but the misty highlands in the Aant annAnr quitahle for afforetation- Routhern Rhodesia already has small plantations which are continuously being ex+ended, ht the laver san l n in 1vaanland-.rhare aI-th of fund has hitherto inhibited development. Planting has recently been started on alarr-yer scale +Nir P-a --+AllaQlimifne f'Acr-.r

Th -" io f iiic "n ls nf' nne,ai'hljm f'iPlAo fnr APu-t okI-nTnm . in Int-.q and export industries. But, besides the question of timing the improvement and economic problem faces Central Africa. This is the evolution of the A supl y ofe ce l ible supply, of cheap labor which welcomed the opportunity of raising its - 15 -

standard of living by working in the European economy. iabor is short, which means it is expensive, and food production lags behind the demand.

The subsistence economy, which forrerly offered a kind of social security for the African, is now a rural slum by comparison with the opportunities in the money economy. The reserves are being depopulated of all the able-bodied and enterprising elements and the balance between men and women in each economy has been seriously upset.l/The only solution lies in a complete transformation of African society by improving African a-riculture to the point where it would be a sufficiently attractive occu'.ation for a man to choose rather than a pis aller to fall back on in bad times. And this means accepting as permanent the urbanization of Africans in what is now the European economy. The task, formidable in itself, involves many hazards. The change-over from a tribal society means the loss of important social sanctions that guided the behavior of the African, they have to be replaced. The emergence of the hfrican as an economic factor in his own ri-ht is bound to affect the Europeans and some of them are likely to suffer if they cannot adjust to the chan:,e.

This problem has been tackled with energy and realism in Southern Rhodesia. In the last few years great strides have been made in the transformation of the Native Reserves. In the past Southern Rhodesia has had the advantage of greater financial resources than the other two territories and it also has less political inhibition about enforcement. Now that Northern Rhodesia is in a bettfir position, it, too, has stated. its intention of achievint7 the same end3. Nyasaland, unfortunately, is still faced with inadequate funds and sevsre overcrowding in the southern na-rt of thA tprrit.ory.

n grent. cliffPrerre to the 'A4ecir-, J i nin o niilrl mqlnz development of the three territories. Certain economic advantages are car * evere fluntuaina in any An comodity though they are bound to affect the producing territory, will have a less serious effect on the federal revenue. The federal government .il1 thals feel more Secure in planning long-term development, which will not only be better for the economq but will n large contracting firm +o establish h in Central Africa.

Other advantages are less obvious. A Central African Council was set uno after-- the war- in accordanc i-it+nh=Woan (Tii!3n rp..nnTerida- tions, but it did not work well. Interterritorial problems, among which coal, power an1-d transport are out stan--d ing, hav no+enrsle ih the decision and finality that could be expected from a federal authority. Lon,--range Wrbems th -u~a- deeomn-a.ne-~iul of the three territories still have to be faced; at present there is a tendency for each to aim at self-sufficency. and although Aricn de-1--,"ent would remain the province of the territorial rather than the Federal

V IA-A TahlA TT. - 16 -

Zovernment, it is reasonable to expect a much closer co-ordination cf method than hitherto.

Projects which promise only a lon,-run return will be more feasible for the Federation than for an individual territory. This is bound to benefit Nyasaland without necessarily hurting the whole economy, if a project of general interest can be located in Nyasaland. Afforestation is the first example that comes to mind.

Economically federation promises advantage for the whole Central African pooulation including the Africans. Their political opposition is, no doubt, based on the fear of dominance by the less enlightened elements of the European population. They do not wish to buy economic advancement at the cost of social and political stagnation. Historically, their fears are real fears. But there seems good cause to believe that, if the present temper of leading European opinion in Central Africa continues to prevail, the African will :ain both political and economic advanta,e from federation. This is by no means certain, but the chances of a stable bi-racial society emerging seem sufficiently good to warrant the Yamble.

Until a final decision is made about federation, development and it.s financing remains a territorial matter. Each territory has a develop- ment plan, which embraces those fields in which the governments will be the inestor.- Tse nlAn nnr the methods of financin- them are described in Part II. They include the development of the Rhodesia Railways, which S a Joint interest and a Joinnt regnonqibilitv of the two Rhodesias. Investment plans for the next three years call for a total expenditure on n wrks nf LOR milin VinannA fnr n1l hut. W million of this is in-view. It was proposed that the I5RD Take a loan for all or part of 44- --,,, 4.,- TV-1 " Dknele%ciQ ~irch trwuld, '. vre- t.he ;i-)r to the railways. The reasons have already been stated why it is considered good run1c f-n' the~T4ho ian to oe their own re.ourreq as far as possible at the present time. If the IB.RD were to supply T5 million of the required amn LALi+ millio.n uinlA rpmxi to hn found hv Northern Rhodesia. southern Rhodesia or the railways themselves. The conclusion is reached in the subseqnt stAins th'at +.hio coiul hA clone wtithout imoosine hardshin on either econony. - 17

PART II

Northern Rhodesia is much the largest of the three territories, being nearly twice the size of Southern Rhodesia and eight times the size of ,yasaland. It is also the most sparsely populated, having a smaller population than either of its neighbors. in 290,000 sanare miles there live less than 2 million people. This may be compared with a population of over 20 million in Turkey, a country of about the same size.

The railway bisects,the territory. Along the "line of rail", as it is called, lie almost all the towns and economic activity. Nearly all the 38,000 Europeans live in this area. Away from the line the money economy rapidly recedes. Distances are great. To east and west there are parts of the territory over 400 miles from the railway. The southern point of t1e railway, Livingstone, is itself nearly 1,000 miles from the sea by rail.

For forty years after its occupation Northern Rhodesia remained a desperately poor country. 3conomic activity besides subsigtence agriculture i-as limited to the lead and zinc mine at Broken Hill, the sawmills exploiting the Rhodesian teak forests, and a little maize and tobacco farming. In 1926 exports were worth only T430,000 and government revenue was about the same. But by that year rich copper ore-bodies had been discovered.

Surface copper oxide ores had long been worked in the neighboring Katanga field in the Congo. Similar ores in Northern Rhodesia were much poorer and had been worked only intermittently. The discovery consisted of sub-surface sulphide ores. Work proceeded rapidly and by 1930 some 30,000 Africans were employed on the copperbelt. The inflow of goods swelled cus- toms receipts and government revenue was double what it had been a few years earlier. But the boom gave way to slump with catastrophic suddenness.

By 1932 all development work had stopped, some mines had closed down and the two that continued - Ykana and Roan Antelope - were restricted in output by international agreement. African employment on the copperbelt fall IbIpnw 10,000. The market for food in Northern Rhodesia itself and in the nearby Congo collapsed. The government sustained a severe loss in revenue, 14hich 1-7as all the harder to bear- as it now had to meet debt charees on money raised to build a new capital at Lusaka.

Many government services were drastically cut during the slump, -mong them the 4ni1 ,,?l frnat and veterinwry stervicnas- EvAn in 1Q8 the total budget for these three services was less than 540,000, although kw+h+4a hwasenmntrre1vdwng orantlyr ineanand voynna in 4n- come tax from the mines. Another mine, Mufulira, had by then been in pro-

UULV& 10 SIEACV US -A - -- ;. VVYPUr 4-±IjVV long tons, a tenth of the world's production. Exports were valued at !10 mnsn, m ua p rO uurnat Vsvunut nau risen to 1.o million, but much of it was required to provide essential services in the economy which had changed little since the investment boom of 10 years earlier. - 18 -

Thus, before the war, Northern Rhodesia -as a backward land with one narrow strip along the railway tied to the world economay. And such -as the fear of the vagaries of the world market that both the mines and the government discouraged vermanent urbanization of the African as a matter of policy.

The opening of a fourth mine, N'changa, was follo-ed shortly by the outbreak of war. A narticular effort war made jurinP thP wnr the nak year being 1940, when 262,000 long tons -ere produced. Supply difficulties, annin.11v nAl nnd trnnnnrt hanAmp ant t he end of the Mar and the market was uncertain. By 1946 output was down to 182,000 lons tons. The coal pnhAm t nt411 ncute The man4ni ompnm 4e hnve h.a to n-- their own trained labor to 'ankie, the supplying colliery in Southern

"mediaeval expedient" of woodburning. During 1951, nearly half the fuel used was wood. Nevertheless, in that year produciZon reacneU 3Vk,0v0 lOng . tons. The increase since 1940 is due to the development of NIchanga.

The demand for copper has continually risen and the -rice with it. .6ectrolytic copper in London stood at 62 a ton at the beginning of 1900. It rose to E140 a ton in 1948 and after a fall during the recession of 1949 returned to that fg're immediately after devaluation. The last large increase was from 4231 to T281 on June 15,1952. In five years the value of mineral production has increased five times:

Thousand Tons illion 1946 1951 1946 1951

Copper 182 309 12_ 62

Other Minerals . . 9

1q, 71

During the same period mining costs have risen. European wages include a bonus based on the price of copper and African wages have not lagged behind them. The former have risen by 700 and the latter by Over 100%. Royalties to the British South Africa Company are also based on the nrice of copper. But co t increases have fallen far behind the price. In 1946/47 operating profits of the four copper mines were i6 to 17 million. In 1950/51 they were about T30 million.

The principal source of government revenue is income tax on com- panies, which is now levied at the rate of 7/6 in the T. a much higher rate than before the war. In 1946, when government revenue was a little over T3 million, about half was obtained from income tax. most of it from the mining

1/ Financial years and definitions of'operating profits differ somewhat from Cnmnany to nmany Thp'Q na -nnah imo-Qu fa "-rWNmn,, 0n - 19 -

in companies and the B.S.A. Company. Since profits have risen so rapidly of the last 6 years, income tax has become easily the most important source revenue. In the 1953 budget government revenue was estimated at 30 milion of which b22 million was to come from income tax. Since 1949 the government agree- has had an additional source of revenue from mining. In that year an ment was reached with the B.S.A. Company, whereby the company agreed to hand over 20% of its royalties immediately to the government and to transfer all mineral rights to it after 37 years.

The following table shows the growth in government revenue since the war: Government Revenue in b Million (revised)

Income tax 1.6 18.3 22.0 Royalties - 1.6 2.3 Other 1.7 6. 0 Total 3.3 25.2 30.3

Proportion directly from mining (in round figures) 45% 70% 75%

Armed with this sudden access of revenue, the government has tried to expand the civil service. There have been difficulties. Housing and public utilities had first to be provided. Secondly, there has been dif- ficulty in finding trained men for certain posts, notably in agriculture. Even so, departmental expenditure has increased more than four times in the last six years. In addition, there has been an extremely large increase in non-denartmaental expenditure. The latter includes public debt charges, pensions and a variety of miscellaneous expenses. Of these much the heaviest are the subsidies on maize and wheat which for the last 3 years have together averaged over Ul million. Revenue and Recurrent Exoenditure in z Million (revised) 12L6 a t 1953 (est.)

Departments 1.7 7.5 9.1 Other recurrent exnenditures. 5.6 .2 Total 2.5 13.1 13.8

Available for other expenditure 0. 12.1 Revenue 3.3 25.2 30.3

The revenue available or estimated to be avaIlable for non-recurrent expenditure has, as is apparent, been very large in recent years. From l96 an to 1953 the amount was nearly M43 million (after --I lance for losses investments) to which the last three years contributed over ;34 million. - 20 -

Thinlare anm has han l ntA t.n a number of different nurno.e:

Allont,ion, of Th2nda 10/7-1Q0 & Million Reserves 7 Public Works 7 nDevel mn+ TPiur 17 Railways 2 Tan- T.r,an+m-a+ a A (who, annoin4c+4nn 10 1JU10 41.OUL Q V AUA ~ ~ ~ ~.~ w s 43

Reserves include the reserve fund, a special reserve for power projects and the current working balances. Loans and investments consist mainly of participations in Central African Airways and local companies such as a cement company (in partnership with the C.D.C.), a road transport undertaking and a building society; and the appropriations have been made to local authorities and public bodies like the Industrial Loans Board. L2 million was allocated in the 1953 budget for a loan to the Rhodesia Railways.

The Develooment Fund was set up to finance the execution of a Ten- Year Plan first approved in 1947, but much modified since then. The 1947 plan was an attemot to tackle the almost untouched problem of the rural areas. As the report stated: "The territory consists of a highly industrial mining area, a railwany Elt now nonerouq- and the rent of the country which. with few exceptions, gives a general impression of being practically stagnant. It is thin _Qtate of affair that the plan for rural develooment will try to correct and it may prove a formidable task." The whole plan called for an expenditure of 11 million nf +.him mral o-nomic qerviceq nnd roar announted for half.

As revenues rose and thep nopaAn intvenc~e- the charntAr of +.hA plan changed. In 1951 a revised plan was drawn up calling for an expenditure of LIA million Cer L20 million of the Z21 million increase was taken an hv housing (both European and African), public utilities and European education. The reSt of t-he ivnreaase a rnnj nl du toAiia+%Qan AqII n a rii previous estimates of the cost of construction were far too low. It should he AmnhA*ig.Ad houver, that. t.he develonment n1an in far from covering all the public investment envisaged.

Most of the development plan as it stands is a list of capital rGqumnt for settling the increased Pop+ulation .n+ Tect Anblin the European population in five years and increasing African employment by more 1 4 4 4 4 , U-l -P 4- 4+- - na--. . A 4- -1 4- Tw .o+ ,. nvn +nl. a n -aA4+; a^a +In development of the country beyond the need of the new urban population is 4 n,.,.- - . ------an n.a _Pa ,. .mva,.,+ 4- +1-a 1 a ._ ^pn,.P +l',a scarcel PWO-,1rJ~.LLJ.V GLZ j-zave* Becaws WA. reture cli-AA 41 VLAV,~J*' I.~ .L JW -'.. -W~ 1930's, hardly any basic information on the resources of the country exists. ror example, shorLy ueure it Uins the aumbe theW aue rivZ.- 1 .asses through a gorge where there is a possible site for a hydroelectric dam. Up river from the gorge is a vast stretch of open country known as the Kalue Flats which is recognized as a potentially rich area for irrigation. Behind the Flats there lies another gorge with a second possible dam site. But little is known about the hydrology of the river and surveys are necessary to establish accurately the topography of the gorges and the flats. - 21 -

Forestry is in its infancy and the new department has many tanks nefore it besides the pressing and, it is hoped, temporary needs of the copperbelt. Steps must be taken to save what is left of the valuable Rhodesian teak forests that have been overcut in the past. The department has virtually to start from scratch in the establishment of Forest Reserves to Drotect the land and to ensure a stable supply of timber near the towns for household and minor induis- trial purposes. But though woodland abounds, its value apart from a few rare hardwoods is little known. It is possible that the commonest types of timber could be used for pulping, but this remains to be seen.

It is only in recent years that the veterinary department has been able to tackle pleuro-pneumonia, a disease which had for many years kept down herds in Barotseland, one of the two provinces where the tsetse fly does not prevent cattle-raising. The disease is now eradicated and, because of the rapid in- crease in the urban African population, the department is concentrating on increasing the quantity of cattle rather than the quality. In this it has been successful though the territory still imports large quantities of meat and dairy products.

Dpmand for agricultural nroducts has risen raridly too. Although mai7e production is beginning to catch up with demand, the territory must import all ite wheat xn munh of its other food. Turonesn avriculture is- at nrqsent. extensive; to be competitive it must become intensive. African agriculture, excent in the maivP-nrnin Tona ArAn Alona the rail line. is still sub- sistence agriculture. But, again, guidance to farmers depends on research e+A11 tn ho Anna

Even so, beinningnhave been maei in the imnrvement of Afrienn fnrm- ing. One scheme for "Improved Farmers" is in prorgess in the Tonga area (and nil + ma +1 in A.hor -rona) where nrneivintion for the mp.rret ic _ ta'hlihri practice. Yields vary from one area to another, but in general lst class 4m.vefA rmes have ,-hined4na yi ovil 9 m +.ht of ui,tmonrpv Capital improvements such as storage sheds and roads are financed by a levy on maize sold +o the vnwam--nt bunly aney, the -Taz Cnntrol 3cal"A h fact that this levy results in a lower net price to the African than to the Euoean newnesshas,~ unn~ ortunately,caedom+ ~n+l ~ mnanA in onma o'.rntmntaf

XiLVL 4.wVv n-,gr *~£ -U- - -- and less fertile parts of the territory. Starting only four years ago - in

someLip4o "A;M U& AV~ £AV'_ILa . luzI_. .AA, T%e- mosA- CU remar l.Sa-. able feature is the rate at which loans made for clearing land and for buying catVLeV1e anU are6mplemJeLo V,Uv r XLL. 1he avage farmer in the earliet established group has paid back i40 out of 113 within 3 seasons. This high rate of amortization was achieved in spite of extereely Low incomesi in 1951 the average income was only ;75 and this was the best year so far.

Both schemes are as yet on a small scale. There were 900 improved farmers registered during the 1951/52 season and only 120 peasant farmers. The kind of improvement is still elementary, though a great advance on pre- vious methods. Farms are laid out with contour strips or ridges and plots for rotation. The farmers are encouraged to compost their cattle manure and vegetable waste, to grow green manure crons and to buy chemical fertilizer. The authorities also distribute implements such as ploughs, harrows, shelling, - 22 -

and in some grinding and weighing machines, and carts, Credit is available cases the price is subsidized.

Both schemes are voluntary. Altough they were In"tIally viewe volunteers with a wary eye, suspicion seems to be overcome fairly quickly and are beginning to come forward in substantial numbers. he Principa u - u at present is to find adequate staff.

A modification has been made in the original conception of rural fadS On thoSe development. It is now intended to concentrate staff Unud return. Two areas where natural conditions are likely to yield the highest T . "Intensive Development Areas", the Kafue Basin and the region utweu for the develop- Bangweulu and the Luapula river, have been selected. A plan ment of the Bangweulu-Luapula region, which is an important source of f5h, they may has already been started. If schemes of this kind prove successful, in time require large amounts of capital. modest. Apart from the mines, industrial development has so far been (cement, The principal new industries are concerned with building materials steel windows) and food processing (grain-mills, brewery). But tne market, is still limited and the Industrial Loans Board established though expanding, use of by the government has not yet had much opportunity to make effective funds. One sizeable project is in view for using a local iron-ore deposit to make pig-iron and the steel balls used by the mines to grind concentrates, but the financing of it is still uncertain. next In addition to completing the development pro,ram over the four years and carrying out some works of a similar nature outside it, the dam on government has one large undertaking in prospect, the hydroelectric opposed to the Kafue river. The argument in favor of the Kafue scheme as it would take Kariba which naturally appeals to Northern Rhodesia is that the mines. less time to build and thus bring quicker assurance of power to The canital cost would probably be about ;27 million, which is less than the first stage of Kariba.

The most recent estimate of the cost of the development plan was LA7 million. of which some 18 million had been spent up to the end of 1952. been financed by appropriations, loans and Colonial Development and This has about Welfare fundA. Payments into the Development Fund in 1953 will be million, leaving 622 million still to be found. If Northern Rhodesia's 7 be started investment. in an hydroelectric scheme. which could, of course, only its in the course of the four years, is put as high qs -15 million, then To make estimates of revenue ^.a+a1 requrements will be about 635 million.M since surplus to ordinary expenditure over the next four years is hazardous, It anna an heavily on coner orices and production. But, assuming adequate will coal supplies to maintain production, the likelihood is that the surplus .wn+oh annl tn ten rAnuirements. even if. as is Possible, copper prices per ton. should fall somewhat below the previous level of ;231

capital expenditure is not the only use to which Northern But up UAes4n ca n put 4t euninu fuins- More than ever now. it needs to build in copper prices, govern- reserves to ensure that, if there should be a slump ment services can be continued and, if noggible. a stable level of employment of the government in the construction industries maintained. The present aim

I~ -rsre/ for nower already exiqt. - 23 - is to b i +,%h cmv"= PnA +.-.n L12 million by 1956 (about b5 million more than the present figure), but they are, no doubt, right in considering JL-. I J -iU

Partly as a res,ult of th-_ - w~ -----1 -r?~~ . ca tf best to dis-- enjoys, Northern Rhodesia faces difficult problems as to how pose of t ancme 'hI 10-n1e hr.Ten tonsumnH on nnd investiment and between financing investment by borrowing and by saving have to be considered over- the~ Ulgl~ijna, babbh The prospects for the copper industry over the years are good. The mines .M-- 1-- -- 4 -- ^A + 1,-r~+~f~~1 -~suc in ortilerli 'i1UU(d0J.C: c-t .LU;V%'.;OU ±IJL. L &j' .- of copper in the sterling area, which is a net importer of copper at present. Production plans announced by the copper companies iude the- development Nchanga and the opening of several new mines. Output should reach of I------hoo,oo - 'I -.- M- - 40UUsUUU tons by l95)O and 4U^,UUU Ton U JUw Yt!U, .LCaUe Ani ,A -m'Y reason to expect that there will be a market at these levels. For the present, at least, the United 3tates is showing a strongirArst in coblt and MSA has financed a mine and a refinery. But stable production does not mean stable income. Prices are liable to fluctuation. Durig the pese period of rearmament they are high and are stimulating investment elsewhere. The trend of costs is an unknown factor, but it seems that tUe cost of African labor is bound to rise. On the other side, the recurrent expenditure of the government is likely to increase. How long the large gap between recurrent exvpenditure and revenue will persist is a matter of guesswork. It would be safe policy to treat the large surpluses now accruing to the government as a windfall unlikely to be repeated and to guide economic policy accordingly. It is in this light that the high standard of living now enjoyed on the Copperbelt must be viewed. The rate of consumption there is extremely high and the consequent investment in shops and service indus- tries is bound to attract labor, capital and scarce materials away from what may in the long run be equally important sectors of the economy. Immigration has been stimulated. To be sure, a good part of the increase has been necessary for the expansion of the mines and of the civil service. On the whole, however, immigration has been little inhibited by either legal or economic barriers. The rapid rise in purchasing power has provided ample opportunities in trade and service industries. The demand for food and the profitable price of tobacco have encouraged settlers to take up land. But new farmers have not always been as experienced as might be wished; in particular there have been cases of land being let to share- cropoers by absentee owners. The capital cost of this immigration has already been noted. The greater opportunities for African employment have also affected the econom.y. The mines have no shortage of labor, but construc- tion and farming have felt the pinch in spite of higher wages. Mechaniza- tninornnq hin the qo1ition hut often at considerable cost. Rising labor costs are a natural feature of any developing economy, but it still remains necessary to ensure thtn +hy An not distort the econoTm. One effect in - 24 -

Northeirn Rhodesia. is to denopulate the reserves. As the Department of Agriculture itself points out:

"In many native areas a serious problem was the scarcity of manoer for apricultural nroduction in the villa.es. In many districts there are very few villages in which there is not a ve"r r proportion of the male nonulation away at work on the copperbelt and elsewhere, leaving the women and. children to fend for themwelves in the reserves. In effect. the men-deserted villages become depressed areas and more 14llo t fnAd Qho+aeO than Avor This iq narticulArly the case in the areas where finger millet is grown as the st-aple food, because it+ is the man'se work?-L ton cutheree to burn for the gardens." .1/

Northern Rhodesia, there are only 5 men to 8 women left in the villages.

JUL%4 O.L Ules 1_ mLen, J.IL r 2. ar prJVoab.ly eJ"LL .L LJ4J1~.LL.L1L* demand for food and a smaller supply. The deficit is made up by imports wnich are subslizeU by le goverment. nureover, owing tov shoutag European farmers are encouraged to grow crops like maize which, since they are relatively easy to grow, are more likely to become the province of tile African in the future. The future of European farming is likely to be in those types of production where a higher degree of skill is needed, eg. high- grade meat, dairy products, flue-cured tobacco (as at present) and wheat. It is only -y this kind of evolution that the inherent conflict between two standards of living can be resolved.

It will not be an easy task to convince public opinion of the desirability of curbing consumption - and thereby investment - or or stricter control on immigration. The fact is that Northern Rhodesia has so far financed almost all the development other than that carried out by the mining companies out of current savings. Its public debt is still fairly small, U5.9 million; and of this 4%0.8 million has been relent to the railways. The natural inclination is to encourage immigration and to favor the financing of more development by borrowing abroad. But immigra- tion is not necessarily synonymous with development and, as already pointed out, it is not in the interests of Northern Rhodesia to use up its reserves of capacity to borrow at the present time. Furthermore, the fact that the world in general and the sterling area especially is currently short of capital imposes an added obligation.

Present borrowing plans in London are, in fact, limited to the 125 million borrowed for the development plan in 1952. A further 1,Lor 8 million (depending on circumstances) might be borrowed later on. Beyond

1/ Deartment of Ariculture, Annual Report, 1950, p*ll. - 25 -

emtting on a rserve fund for the niriose. no plans for the financing of electric power development have been made pending a decision on which ro4e+ is to be undertal+nh when it will be started. how much it will cost and what will be the shares of the two Rhodesias.

As stated earlier, however, Northern Rhodesia should have

Ae-^4 -- p-pe ^p" +li vAv+ ^n" " t- nmnmA- its fipp.vlonment--. C" .. Lj"C&~ V%-' ~ ~ ' W-Af -- **'4-b J- program, to contribute a large share to power development and to build up 4 reserves. 'PII- to ml t'+h1i 10,T hu?Wri f,e Inan the railways would be financing the development of Northern Rhodesia in a ver UI*..; OZIOZ O-L±L%;C J.LO SU S ILA J"- JU.'*& SS particularly hard hit victim of any deficiency in the railways. There is no great U-Keih"oo' tAtL suchI a2 d.verIon-UI ofL .Unds.L need%seriously h-alpe development in general, provided steps are taken to raise money from local resources elner by nternal borrowiug or by fiscal measures u ingboom periods. In fact, if these steps are taken, they would probably make the path of development smootMer. - 26 -

2. Southern Rhodesia

Southern Rhodesia has the most developed economy of the three territories. It has the lar.-est luropean population (138,000 in 1951) ana the hirhept national income (;96 million in 1951). A lrjer area is accessible to communications, since the rAilway itself takes a winding couse throuigh the colony and the railway administr"-tion operates road services to outlying areas. Government services, too, have evolved f)ither.- Partiv in r0onSeounce of this and -artly because the government has invested considerable sums in undertakings such as the railway, the ni 14 ezAlh+ jo hi h . -mnarativelyine-.A the anuiqition of the railways 0- - W___ - - - b --, i _ I- - -. - it has'pu beende running at about the same level as the national income.

flthough gold and other minerals have lon. been the mainstay of now t.ion-d mininp- -L.U- y L-4-1+ a-A maonuf+urin-, have o-t-- in their contribution to the national income. In 1950 their respective of the change from before the war can be readily seen from the following

1939 3.6 .8.1 .2.5

1946 11.8 7.6 7.6

1950 27.1 15.0 17.0

(Note: These figures are illustrative; they are not directly comparable)

The outstanding feature of the economy has been the tobacco boom. wil in. The value of the crop in 1939 was under el mullon and in 50 elus Roughly speaking, both output and price.were tour times as high as before the war. The prosperity of those employed in the tobacco inoustry has ou a large extent been responsible for the broadening of the market for secondary industr:r and the continued high rate of investment in raeting to take care of the inflow of immigrants. Since the fall of 1951 a combination of events has checked the ?revious rate of expansion. 1951 was a bad crop year owing to drought, a not uncommon occurrence in Central Africa. The tobacco crop was 88 million pounds as against 107 million the previous year. This was the first time in five years that there had not been a substantial increase in output. The loss has been put at LA million.

Note: since a report on the o economySouthern Rhodesia (E200) was published in January 1952, unis section is conined to recent developments. - 27 -

1 4 -";e.n %i .. P.11rVenn n Ai~Ar1 ~ from 1.8 million bags (of 200 lb.) to 1.2 million and would have been lower but+ for a much more 4 t%P hT+i-r-iel rrinry-a 7h o Af rin surplus for sale was down from 0.7 million bags to 0.2 million. 1 million 1 bagsJ~'kp 4- be -0-4- 4,.a.W .... _ 4 -

.LIJ..S L IJ.LL UAWLIC WA .L04IL=.L 0 cul.L. WLLV %,WAU1.V'j 4# V~ L. of the trade balance coincided with the very heavy inflow of imported

UV.Ls WLa4k-o was. a. f amtn. ofJ the~ tr d 0 V. 4U uL4LO. U.ju C&...J-, C L Uh . such as Australia. In the six months from October 1951 to March 1952

p±VCL1,e bank. depposis Afl.lJ 'by nelly T250 41JL.11210n.. 14inL S-Itz U.LCi. "' in credit to the public and to the government of over 16 million. In consequence the net assets of the banks held 1 LonuoU fel, frum 25. miL- lion to L3 million (see Table XIII).

The current account of Southern Rhodesia showed an adverse balance of no Less than r million during the year, more than half the national income. The very high rate of investment of the last few years, which amounted to nearly half the national income and was mostly financed from overseas, continued. In addition, large stocks of consumers' goods were accumulated.

Early in 1952 the United Kingdom introduced a tighter monetary policy, which reduced the flow of capital overseas. In addition, the banks in Southern Rhodesia agreed to restrict credit in accordance with the general policy in the sterling area.

In the 1952/53 budget introduced in April 1952 additional measures were taken to reduce the foreign deficit by cutting both investment and consumption. The loan vote is to be lower than last year. Expenditure in 1952/53 is budgeted at ;15 million as against an actual expenditure of L17 million during the previous year. In line with the cut in investment, immigration is to be more strictly controlled. Immigration has been the prime cause of the high level of investment in recent years, particularly in building. The value of building construction in 1951 was as high as L14 million. Because of a larger establishment in the civil service and charges on the debt incurred in the previous year, the ordinary budget was increased by 21 million. As it was found impossible to reduce government expenditure, the burden had to fall on the consumer. New taxes were introduced and the rates of existing taxation increased. The new taxes were a purchase tax and a head tax for all adults except Africans, but the purchase tax was subseauently replaced by an additional surcharge on income tax and increased duties on cars. The largest additions to revenue were expected to come from a 64 increase in the income tax and a wide range of increased customs duties. A surplus of L660,000 was expected in contrast to an actual deficit of nearly L2 million in t.he nrPvious vear. - 28 -

This combinction of positive measures with fortuitous events hao had a rapid though mild deflationary effect on the economy, as it was intended to have. Merchants have been forced to hold sales to liquidate the stocks of consumer goods that are now more expensive and more difficult to finance. The textile industry has felt the worldwide slump. The spinnin: mill is working one shift instead of two and imports of textile s during the first eight months of 1952 were 25% less than in the previous year. The last cotton cron exceeded re< uirements.

A marked change has come over the building and building materials industries. Productivity in buildin- is higher and costs are be:,inning to cone down. The ca,acity of the cement plants is now at least equal to the demand.

Labor is much easier. The gap between vacancies and unemployment has narrowed appreciably and sectors of the economy such as the railways that had previously found labor hard to keep report a less rapid turnover.

These changes have hel ,ed rather than hurt the economy. The loun pro,ram is lower than last year. but on the other hand some exoenditure is being financed out of revenue. Such cuts as may be necessary because of the shortage of local loan funds Ari 19A2 are not likely to im--o.e more than a slight delay in the four-yeur plan. This does not apply to housin . for which the allocation can now e refli:np.rl as a nprmanAnt measure, since private sources of finance and the capacity of the building induqtrv are now morp-nabhlp nf vsnnving the demand. A! an offset to this, there will probably be additional expenditure on roads and municipal

For he ~+eutue te prspets ae god The recent increase in rates should raise the receiits of the railways. A record cro-) of booth molize and t obacco shoald snsl=re satisfactory tax ravenue; the actual surplus is expected to be hi.-,her than the budgetted surplus.

subsidies. It is the solicy of the government to subsidize maize only ln eventional circntatns tjA neverat v4 i+ P1n-+-+4u 4m +hn" ""4- This year's cro- should provide reserves against a drought and, in aBd ij rmnxdti cert-in.w aA costS,n.+, particularlynr+4,mn 1r burlapkn-in bags,willfall_;m1l P..11

in taxation, the government should still have a substantial budget surplus. There is, m lIttle que+tion t-4at it-4 is th4-- -- oermn policy to finance more and more of its own investment from local resources, wheth i e Ineralorywing or budge Surluses or WV UVU 0 U11rd statutory bodies themselves. There should be little difficulty in finding the aiowalsumeoit thes erlv, t2ha for thae railways either from the railways' receipts them~selves, now that they have raised their rates, - 29 -

in raru 1 01 U111s, re:jarts Uifulululn wtas urtlwn 1u Wit, auvtncVs made by Southern Rhodesia in Lifrican agriculture. As the production of food is an important matter to Southern thodesia, steps are being made to encourage both Euro;eans and Africans to grow more food. Though quicker results may be expected from the Europeans, it is African agriculture thaT promises the greater return in the long run.

Most of the reserves have been mapped out and divided into arable and grazing areas. Each farmer is allotted a 6-acre plot in the arable areas where he is encouraged to practise good farming by African demonstrators under the supervision of a European officer. Yields of the farmers who follow the demonstrators' advice are very much higher. The following table shows comparative yields for different classes of farmers in 1950:

Yield in bass per acre (all crops)

Demonstration plotholder 7.9

"Master Farmer" 6.6

"Cooperator" 4.4

"Follower" 2.8

Others 1.5

Some yields are far higher than this - in the neighbourhood of 30 to 40 bags.

The improvement of the reserves is a continuous process. It is intended gradually to map out the arable area in each reserve by soil types and other conditions where particular crops or combinations of crops can be ;rown. Destocking of the most overcrowded reserves has already been accomolished and rotational srazin2 has been established in one reserve and is being introduced in others.

Africans with sufficient canital can also aply for farms of 150 to 250 acres in the Native 4urchase Area. If ao roved by the Native Land Board, applicants are given a 9-months course before takin up their farms. These farmers receive much the same kind of a.qistance as those in the reserves, and they receive credit and conservation subsidies in much the same way as EuroDean farmers. As nart of the -urchase a'reenent the undier- take to maintain proper rotation of crops and otherwise keep their farms in good order.

The nrininle of making the teriure of farma ouhient to gooA fwmina practice is being extended to the reserves. Under the Native Land Husbandry Act of 1C)1. any native reqerve can he ,adenated n rAo%-had anra in which all fdrmers must thenceforward be registered holders of farming or ing pctcunethAcmas a fm la toiaht.acanceat of h ing practice under the Act makes a farmer liable to cancellation of his rights - 30 -

Ine Soutnern Rnodesia governmeni s wel on tne roau owards Its ultimate goal, a society in which fQrming is sufficiently attractive for the african to atdopt as a permanent occuption. In Iact part of the program envisages the gradual creation of village centers with shops and specialist artisans. Embryonic versions of these centers already exist. Plans for urban African townships are also under way.

The potentialities of African agriculture can readily be seen from a few figures on yields. From a crop of maize in a fairly good year of 1,800,000 bags, about 1 million bags are retained for consumption and 800,000 sold. If yields could be doubled, the surplus for sale would be 2,600,000 bags or as much as the whole record crop reaped by Europeans in 1952. Present African yields are far lower than 2uropean and they have as yet hardly grown any hybrid maize. The possibility of doubling yields in food production, whether it be in maize or more drou:ht-resistant small grains, is by no means remote. The principal obstacle at present is lack of staff. - 31. -

3. Iasaland

Nyasaland is a narrow strip of country 500 miles long and, on the"Ifaveage ony7 ilswd. itleulo te- ~ al Nyasa and on either side of the Shire river, which flows out of the lake and Joins t:e ZambUeZi a sort UitUnce souU of the frontier wLi Mozambique. The lake is 1500 feet and the lower Shire only 120 feet above sea level. They both form part of tue deep cleft Known as the Great Rift Valley which runs through the length of Eastern Africa. From the valley the land rises steeply to plateaux several thousand feet higher; one peak is nearly 10,000 feet high. The variation in altitude is combined with differences in rainfall ranging from 30 to 70 inches a year.

Nyasaland is throughout much more populous than its sparsely inhabited neighbor, Northern Rhodesia, but the density of population like the climate varies greatly. The African population in 1945 was estimated at about 2 million. Of these one-third lived in fiva aistricts, all situated in the Shire highlands of the south and occupying only 4,200 square miles. The density of population here, over 150 to the square mile, contrasts with an avera-e of 50 in the center of the country and under 30 in the north.

The concentration in the south is due to an influx of people from Mozambique coupled with the fact that the south is the main center of economic activity. Beyond the terminus of the railway which runs a short way up the west shore of the lake, the country has been economically stagnant. The apparently ideal natural waterway of lake and river is an illusion.

When Nyasaland was first occupied, goods could be transported up the Zambezi and the Shire exceot for a 60-mile long series of cataracts -In the middle Shire. But as a result of a steady fall in the level of the lake and the formation of sandbars on the uper Shire, the river dried up. The railway was built in stages as stretches becar-e no longer navigable. In 1935 the final link in the railway from the Lake to Beira was completed by the building of the Zambezi bridge. about this time the sandbars broke, the Shire began to flow more strongly and a road brid:e was swept away. In 1948 a railway bridge had a similar fate and there are now lar,;e areas under swamp that were formerly cultivated. The Lake suffers not only from the difficulties that the variation in the level pr3sents to the construc- tion of ports but also from sudden storms which have caused at least one steamer to founder.

Poor communications and the lack of minerals are lar:'ely responsible for the poverty of Nyasaland. Hinerals would have attracted foreign equity caoital and provided onortunity for emoloyment and revenue for development. Above all they would have provided steady traffic for the railway, which with itR bridgeA was costly to build and, because of the ascents from the valley into the mountains, difficult to operate. The small amount of aarinultural amrnrt oriie and the nomnlpmentArv return tra?fin have never provided sufficient revenue even at high rates to pay for the charges o - 32 - the debt incurred for construction.

The railways are privately owned, the Nyasaland Railways owning the setion in Nvasaland and the Trans-Zambezia Railways the section in Mozambique, but the burden of financing them has fallen on the government. Most of the- capital neededhaq hen raised by debentures guaranteed by the government or by money raised by the government on the London market znA v-alon+ + +.ho "Ailym nan bt Durinp the 1910's about V-1 million of capital was supplied in one way or the other.

Neither the railways nor the government could meet their obliga- t4ns nA +he Tj4+Ad Kindom nAd to make ^ 1nnn1v in nir The roht Trans-Zambezia Railways to the and of the of4 the 4 Wyasaland government . rrne.,a.rnAd E:'oVe----,n - 4- +1- flr4 +4vlcIP -T'ncrvmr "-,l-+e~A ,r-n Tnr rnv

Ihere~ ha~ve since beenL I I ULA%- --- ~S _ of the railways and cancellations of debt by the Treasury. The position in L7;U was that the yamLsaUnd government was the holder of '4-4 of debentures in the Trans-Zambezia Railways, the receipts from which amounited to some b3,UsUu dnU WlAUl wer-e PtyCu. Uo U17nV U1.LAULL n)LIIUUm VIA account of debts. Against public loans of L3 million requiring annual service o cuu3 uuune-pp-cum th governmen recylveu ou-y y u vTfwIu-o of about 13 million in the two railways. The balance of 1165,000 was made up from territorial revenues and from grants-i-aid from the United Kingdom. Although this sum was less than 5% of expenditure in the 1950 budget and although the greater part was covered by grants-in-aid, the whole railway problem still hangs over the finances of the territory, which until recently were subject to Treasury con-urol. The railways found diffi- culty in carrying last year's heavy maize crop, for which there was inadequate storage in the territory. They continue to require new capital but axq steps which might further development might well jeopardize the already meager return to the government.

The revenues in 1950 were particularly high. The main exports of Nyasaland, tea and tobacco, had flourished since the war. Between 1946 and 1950, the value of the two together, which was more than 85% of all exports, rose from L2 million to 1A million. This happened mainly because of price rises, although exports of fire-cured tobacco, an African crop, increased from 12 million to 18 million pounds.

The outlook was promising enough for Nyasaland Government to look forward to a surplus of revenue over ordinary expenditure in the five years 1951-1955 of 12.7 million. With this sum, a loan of ;3 million and a con- tribution of 71.8 million from C. D. and W. funds, they expected to embark on a capital program of 16.7 million and still add 6840,000 to reserves. This program took no account of probable railway requirements nor of the cost of surveying a proJect for stabilizing the lake and damming the Shire river for power and irrigation purposes; these would cost an additional b1 million., - 33 -

But, as already stated, a slump in revenue intervened and the present Prosnects are that a deficit rather than a large surplus is likely over the next five years. The result is that the capital has been expended or is to be expended on building up the staff of the civil service and of improving public utility services, but there is serious danger of the country beina starved of capital for other urgent requirements unless it has additional assistance. Furthermore, if the Shire valley project proves Promising. Nvasaland will need at least another 15 million for initial works alone.

Some additional assistance has been given in the form of a .L,on-00 inremasA in Colonial Development and Welfare grants, but part of the capital will have to be ?rovided by additional taxation of what is by nmnnariQnn a havily taxed Afrinan Donulation.

Moreo-velr iWithOut vali--r changes in the Re-onomy- the future is not especially hopeful. The area under tea is limited by climate and, in any evn,+ i+ 4. now not ely n-r+Jqi1nrAfAtabl nmArd for the dark-fired pipe tobacco in the U. K. has fallen off and is, in fact, unlikely to increase. frl,- in +-a a-mi+.)i i, cn -e, 1q7czt.P.H that A CA-- -_ _-_j --- -1...... - each family has two or three acres only. Contour-ridging has been exten- presupposes some shift in the population. As it is, most of the 140,000 i1yasaCLanders,VL'5. whO wor'K outside the terriltory, l~+ of the territory.

Development of the north is currently being undertaken by the Colonial Development Corporation. Their rincipa pro,ect is a tung estate on the Vipya plateau. But full development of the north probably demands large road and port construction some UMe vefurz any can%twru be exoected.

It appears that a considerable amount of capital will have to be spent in Nyasaland without hope of immediate return, if government departments are to pursue their work free from the stultifying frustration that the hand-to-mouth financial condLtion of INyasaland must have iudUu in the past. It is not possible here to anticipate the results of 'the Shire survey nor to give an economic appraisal of large-scale forestry or ranching on the plateaux, but something of the kind clearly has to be done to help the cointry's development. The financial position of the railways vis-a-vis the government is also unsatisfactory. The position, here, is complicdted by the fact that one railway is wholly in Mozambique and both the Portuguese government and the Mozambique Company are interested parties.

Nyasaland stands to benqfit greatly from federation. Customs duties can be expected to be uniform throughout the three territories, which would improve the position of the local population. But the main benefit would come from laying the burden of the capital expenditure on the shoulders of the Federal Government. - 34 -

. 4. edtwor thinesq

7'AA r tm.n mTte++rs wlichl complicjAteo the ii=u ofcdwoti ness. First is the fact that any Bank loan would be in dollars or other 'hArd crency-i AonnIr ic +h r%t z i14+~-T nf nnP+e- event it is at present contemplated that the debts of Northern Rhodesia inpenwroa +^ rinance +he r!n41-r.mre utymiA hanam hTc+4A "nme A cally separate from the United Kingdom so far as foreign exchange is

Rhodesia Currency Board and like most colonies' currency it is on the con-

-VUA &* V A.. L11 Ll IJ."uL0 6 . L11E NudS .iing syste L c onsst oUIf~~ branches of United Kingdom banks, whose principal business is to hold the very Large uposiVt U te m.ning companies. 1Ao0T of these companies foreign exchange business is conducted through London. Northern Rhodesia has virtually no exports to the United States other than blister copper sent for refining and reshipment to the U. K. It is quite clear that, so far as dallr creditworthineds is concerned, any loan must rest on the United Kingdom's ability and willingness to make dollars available. A separate paper is being written on this suoject.

Me Bank, however, would want the borrower to be creditworthy in the local currency, sterling. After including a L5 million loan from the Bank, Northern Rhodesias external debt would not be more than L21 million. Against this, about U16 million would be relent to the railways. The total service on the prospective debt is less than 5% of the present revenue and a much smaller proportion of national income. Currently it represents a, small burden on the economy.

The future, however, is most uncertain. First there is the price of copper, the importance of which has already been explained. Secondly, there are the various agricultural development schemes which may require capital in substantial amounts once they are out of the experimental stage.

With so many uncertainties even in the comparatively near future, creditworthiness must rest on government policy. Will the government use the large resources it has at hand today wisely in the knowledge that such favorable circumstances may not recur? Subsidiary questions such as the level of taxation, the maize and wheat subsidies and the attitude toward immigration enter into this. Although the evidence of past policy is not wholly reassuring, recent circumstances have been exceptional, Much more developed countries have been less prudent. Considering all the circum- stances, a favorable view can be taken.

If Federation should come about, the public debt of the various territories would be redistributed. The Fiscal Commissionl/ recommendeci

1/ A brief note on its report is contained in the Appendix. - 35 - that. in the case of debts incurred for railway development, the Federal government should issue stock equivalent in amount and in terms to the Tprritorial Governments. Thus the Federal government would in effect. if not in form, become responsible for the service of such debts. The Federation. thouPh it would have an external debt somewhat larger than Northern Rhodesia's in relation to its national income, would be a more Pvolvd and more balanced Pronomy with more onnortunity to snread its investments. The policy of the government of Southern Rhodesia, which would be the inminnnt nartner, han hAPn sound although it has had __m difficulty in putting it into effect in the face of opposition from nhlin ninion The only nnnomir disadvanna of Federation annPrn fn be the loss of revenue for development that Northern Rhodesia particularly uld suffer, i the scal Cormmassini a recinnmendati ons are fPllQr.MA This is not, however, necessarily a permanent feature. It should be said that the willingness to repay of either the Terri.orial or the Federal g-W,.er-.MnV (SoWf-a -- ^M loesee it) is not in question. But repayment is not the sole desideratum. The Bank woulnot wihth--csont ari se where repaymen menta- it4-ab burden to the economy -- a repetition of the 1930's in fact. If high LvNI 1 ."IUTmC VVSoE I U1t 14UIA." VOIuuVI;y W.00U1 C COnS1= n OU4LIuuEu good demand for copper and other primary commodities, this problem will .1.V.L a~lcriss. 1Ake thle ti-ft.1LeS SLOAIlld reUr LI G-t - er9COLIMLL service of the external debt might be possible only with great sacrifice. Out if the governmenW conIcrneu taKe zsepb to even out fluc1uations 1i their economies, as far as reasonably lies in their power, b- using mainly their own resources for development during periods of inflation, then they will still have a reserve of debt-repaying capacity that should make it possible for the Bank and other sources of capital to help them when they are in the bottom of the cycle. It was with this in mind that it has been recommended that part of the current railway development program be financed internally.

Benjamin B. King APPENDXDC

Report of the Fiscal Comission

In its report published in October 1952 the Fiscal Commission used the 1952 or 1952/53 budgets of the three territories as a basis for its recommendations. According to these the total revenue of the Federation would be about 152 million, more than half of which would be required by the Federal overnment. The only nqqihi qenre- fnr +.'hn orater nrt of t.his is income tax which accordingly would become a federal tax. Only 601o of th --- million to be ra -dithis manner, how-e, would be--~~~ the center, the remainder being distributed to the territories in fixed are expected to levy a surcharge on the basic federal rate. After income accrue almost entirely to the Federal government.

Income tax rates and many customs duties are lower in Northern federal rates could not (at first at least) be higher than those currently preva L-2L1 ng 11 JVErW1vEr1 LIJUU.ale. l11 WoUJ.U enl[alL a 'LOS Of revenue u over b4 million. There will also be some increased expenditure. These changes, together with certain otner adjuuments, wouU meln L uz u. ncl revenue after recurrent expenditure of some L51 million. The principAl loser in this would be Northern Rhodesia, which in the 1952 budget as adjusted by the Commission would have had a surplus of 101 million avail- able for development as against m4 million under the proposed federal system. Nor would the difference be made up by federal expenditure, since the federal budget would have only 13-3/4 million available. Southern Rhodesia would also lose some of its net revenue, while Nyasaland would gain substantially. Details will be found in Tables XiV and XV.

The report contains recommendations for adjustments in the public debt of the three territories. The Federal government would take over responsibility for b6O million out of the b210 million of Southern Ihodesia's debt, and for all the debt of Northern Rhodesia and Nasaland, amounting then to about 119 million. It would in addition pay debt charges to the last two territories on some ;5 million spent in anticipation of loans to be raised. Over half of the total debt of L8h million thus shouldered by the Federal government would have been initially incurred on account of the Rhodesia Railways or the Nyasaland railways. The Federal government would not actually assume responsibility for this debt but would issue Federal Stock to the territory concerned in an equivalent amount and on the same terms.

Note: According to the Federal Scheme published in February 1953. the share of income tax accruing to the Federal government would be increased to 64% and the share of Southern Rhodesia corre,oondin:rly reduced.